For all problems assume 365 calendar days in a year and 255 trading days in a year. Also remember to convert standard deviation of daily returns to annualized returns and use the annualized value as the input for σ. Time is in number of years so divide the number of days to expiration by 365.

 

Stock ABC is trading for $34. The stock has a standard deviation on a daily basis of 2%. The risk free rate on a continuously compounded basis is 2%.

a. What is the price of a call that expires in 36 days and has a strike price of 35?

b. What is delta of the call option?